Friday, October 30, 2009

BioMemetics: Is this another Spin on Platelet Rich Plasma

Recent articles in various orthopaedic platforms have resurfaced with products related to a therapy called Platelet Rich Plasma or better known as 'PRP." Most of our readers know that PRP derived from the patient's own blood is safe, yet, TSB must ask the twenty million dollar question; "Is there a place for this type of therapy in spinal surgery?"

Biomemetics is the latest entrant out to prove that there's a better way to heal bone! TSB is not going to dignify their statement that "Augment" is Biomemetic's alternative to autograft. Everyone and their grandmother knows that with the advent of DBM's, TCP's, and BMP's, harvesting bone graft from the iliac crest has become a thing of the past. Yet, Biomemetic's claims that their product holds purified recombinant human platelet-derived bone growth factor BB which encourages new blood vessels and bone cells to grow.

But wasn't therapy like this attempted by various companies in the last 5-6 years. A company by the name of Cascade took a shot at a PRP therapy back in 2003 and Interpore (RIP) attempted to market a product with an acronym called AGF only to back off from marketing this product for spine. TSB wants to know what our readers know and think about this product. Can this really compete in the same space as INFUSE, or, is this just another slick Madison Avenue marketing scheme?

Trans1 On the Clock!

On Thursday, October 29th, Trans1 (TSON) reported QIII 2009 revenue of $6.9 million which was up 15% from QIII 2008. Reimbursement seems to be a major issue for this organization. Until this is resolved, TSB sees TSON fighting an upstream battle in increasing their revenue as forecasted for the Street. Considering that this organization is doing an exceptional job of minimizing their burn rate, they should have the "legs" to sustain themselves for at least another year. Yet, one has to wonder whether or not they are truly weighing their options in acquiring complimentary products that not only will allow them to generate additional "pull thru" business with the AxiaLIF?

Management must be concerned if they have lowered their revenue guidance for QIV of 2009. TSON finished the quarter with $61 million in cash. So now they are on the clock! The challenge is whether or not they can beat the clock, or, do they make a strategic move to augment their portfolio with an acquisition. With a business model of 66 direct reps and independent distributors, TSB's money is on them acquiring some "me too" products to enhance their revenue. TSB wants to know what do our readers think?

JB to Step Down as Chairman of the Board at Stryker!

The Stryker Corporation announced today, that effective December 31st, 2009, John Brown will step down as Chairman of the Board. JB had an illustrious career as President and CEO spanning twenty-five solid years. Unfortunately, all good things must come to pass. TSB believes that this is an opportune moment to step down considering what awaits Stryker when the government gets through with their OP-1 faux pas!

JB did have some tremendous accomplishments during his stellar career. There was the acquisition of Osteonics (the HA Hip), DIMSO the French company which led to Stryker's foray into the spine market, Osteo which allowed them to venture into the trauma market leading to the acquisition of Howmedica, and OP-1 from Curis, originally known as Creative Biomolecules. If anything, OP-1 will be the albatross that hangs around his neck considering what they paid for the exclusive rights and eventual outright purchase. It would be interesting to find out what the "ROI" has been on that investment. Regardless, Stryker has always had cash and clout in the market by bundling products at the cheapest price to beat their competition.

But the world does change, as do financial markets, as will the healthcare industry, and its better to step down and smell the roses of one's success rather than sit in those board meetings and listen to a whole new generation tackling a whole new world. Besides at his age its time to enjoy other more important things in life than Stryker! Kudos to a stellar career!

Thursday, October 29, 2009

Stryker : "A Hard Rain is Gonna Fall!"

No it's not Bob Dylan I'm singing about! It's been a tough year in Strykerland! You know the world of 20% growth, Harvard MBA's, and those chintzy looking Brooks Brothers Suits. I guess the Board of Directors is going to have to evaluate what's going on in this organization, and do they need to find someone that can keep things under control?

On April 18th, 2009, this site had posted the blog, "Strike 3 for Stryker!" Earlier that week Michael Sullivan, the U.S. Attorney for the DOJ announced a guilty plea to felony misbranding of OP-1 by a Stryker territory manager. At that time the question was asked whether Stryker was feeling the need to accelerate a return on their investment after spending hundreds of millions to the rights and subsequent ownership of OP-1? TSB wondered who is the Captain of the Ship?

As the saga of OP-1 continues, no less inspired by Stryker's need to grab a piece of that $1 billion dollar market that INFUSE plays in, with more and more hospitals evaluating the cost of that product, it is difficult to believe that a renegade group existed at Biotech without anyone knowing what was going on. What if Stryker was really teaching their reps on how to mix a cocktail of OP-1 and Calstrux? Does anyone believe that this was going on at an organization that is known for micro-management, without someone higher up not knowing ?

It will be interesting to see how this plays out, considering that if the defendants are convicted on all counts, they will spend a minimum of 16 years of prison. That is a mandatory 80% of a 20 year sentence. If I'm in their shoes, I believe its time to start naming names, and singing like a canary. You know what Robert Zimmerman use to sing; "It's a hard rain gonna fall!" TSB wants to know what its readers think?

Wednesday, October 28, 2009

STRYKER INDICTED

The Stryker Corporation learned today that a federal grand jury in the District of Massachusetts has returned an indictment charging Stryker Biotech and certain former employees with wire fraud, conspiracy to defraud the FDA, distribution of misbranded devices and false statements to the FDA.

The company is disappointed (Wow! what an understatement) and they hope to resolve this in a fair and just matter. Let's see if Stryker can buy their way out of this one with Ned Lipes testifying in front of a Senate Investigation Panel with Chris Christie helping them out by referring his mentor to represent the company. Conviction of these charges could lead to a significant monetary fine. Stryker Biotech could also be excluded from participating in federal and state healthcare programs which could adversely affect their business.

As a matter of policy, Stryker will not have any comment on these allegations. Why are the foot soldiers going to jail when they probably were following orders. TSB wants to know who ordered the Code Red?

Spine Market Capitalization - Winners and Losers!

As a follow up to our latest blog entitled; "Are Investors Hanging on to Their Cash?" TSB performed some additional due diligence on IPO's and acquisitions from 2004 thru 2008. During that time 62 medical device companies went public. Thirty-nine of these publicly traded companies are worth less than at the time of the IPO. Orthopaedic and Cardiovascular companies have exhibited the most resilience.

The device industry has fallen from grace over the last year. 49 of the medical device companies that went public during this time have lost 5% of their aggregate value dropping from $15 billion to $14.2 billion with an average declining market cap of $306 million to $291 million. Yet, Orthopaedics has exhibited resilience due to a single deal, that being NuVasive. Their market capitalization went from $260 million at the time of their IPO to $1.5 billion. Without getting into the specifics, cardiovascular companies still command value. The fact remains that none of the Orthopaedic companies that went public from 2004 thru 2008 have been acquired as expected.

This may be an indication, as has been written before, that the spine industry has hit a level of pure saturation that has been predicted over the last few years, given the amount of spine start-ups. Some sources estimate that there have been anywhere between 120-200 new companies. Let's look at Trans1 and AlphaTec, a few companies that have recently gone public.

Trans1 was valued at $305 million in January 2008 and is now worth $150 million which is roughly half its value. AlphaTec's market value fell from $243 million in January to $135 million. Both of these companies are primed to be sold. In all likelihood, TSB sees AlphaTec capping out at around $200 million dollars in revenue over the next 5-7 years, especially if they are on a run rate to hit $100 million this year, and we all know the challenges that Trans1 is facing with reimbursement issues.

Since there has been a decreasing interest in dealmaking, this has opened the door for companies like NuVasive which have taken an aggressive position acquiring Cervitech and Osteocel in deals costing them $17o million dollars. Outside of NuVasive, Zimmer has made more deals than any other company during this period. The Big Z acquire Abbott Spine, ORTHOsoft and Endius for a total of $486 million. It will be interesting to see how the industry rebounds over the next year considering that we are facing many unknown challenges. Rumor has been bandied about that Globus is looking at a potential IPO next year. If so, TSB envisions someone of the caliber of a Goldman Sachs underwriting that IPO. TSB wants to know what our readers think?

Spine Quiz of the Week!

Every now and then our readers need a bit of levity, so in the spirit of having some fun;

What's the definition of Insanity?

Answer:

Lew Bennett (Custom Spine)
Ben Shappley (Amedica)
Earl Fender (Vertiflex)

Doing the same thing over and over and over again!

Osteotech launches MagniFuse PC!

It was reported in Reuters today that Osteotech announced that MagniFuse PC (acronym for Posterior Cervical) was used for the first time in spinal surgery at Virtua-Burlington Medical Center in Mount Holly, New Jersey. Dr. Orin Atlas the attending surgeon commented on the unique biologic perspective (what does that mean?) and ease of use.

The product required a minimal amount of hydration and is available in a self-contained delivery system. TSB must ask what makes this product so unique, and is Osteotech limiting the versatility of this biologic by marketing it as a posterior cervical biologic? If any of our readers know anything about this product, we would welcome your commentary. TSB wants to know!

Monday, October 26, 2009

House Lawmakers Propose Lower Fees on Medical Device Makers

It was reported late on Monday that House Lawmakers will propose a $20 million dollar fee on medical device makers. This would whittle down the $40 million that was original proposed by the Senate Finance Committee. The lower fee is a result of some of the major players like Medtronic, St. Jude and Johnson and Johnson furiously lobbying and throwing millions of dollars at Congressional leaders. It's always entertaining when you read that the industry is crying foul, claiming that this tax will hurt innovation. Recently, as far as the spine industry is concerned, how much innovation have we really seen? Under the House legislation, the tax would not kick in until 2013. The difference between this legislation and the Senate's is that the tax will be scaled, meaning that legacy companies will be paying disproportionately to start-ups or early growth stage companies.

Physician Contracts? Who Cares! Distribution Contracts: Proceed With Caution!

Recently, Elizabeth Hofheinz published an excellent article in OTW about academic contracts for physicians. She cites many examples by an attorney specializing in employment law on how physicians should protect themselves by negotiating language specific provisions in an employment contract. So why is TSB commenting on this topic? Because, it has become apparent that distributors do a poor job in negotiating a "win-win" agreement between themselves and the company that they desire to represent, especially, if they intend on distributing for an early-growth stage company.

The first concern that I have always had is whether or not the distributor has thoroughly read the entire agreement. The reason that this is important is because most companies will insert language that will leave you vulnerable in the event that there is a change in ownership, management or strategic direction. Recent history tells us of the chaos and lack of transparency that existed during the Kyphon and Abbott Spine integration by Medtronic and Zimmer.

Scenario #1: You begin generating sales for an early growth stage company and are on a run rate to produce $5.3 million in revenue when there is a change in management. A new president comes in and evaluates that you are making too much money and decides that he is going to cut your commission rate in half. What legal recourse do you have if you haven't addressed this potential scenario when you negotiated your agreement? Zero!

Scenario #2: Let's say you are the same distributor, you are generating $5.3 million dollars in revenue and the company is sold, what recourse do you have if the new owners, hypothetically Medtronic, decides to terminate you as the distributor with a sixty day notice, only to use one of its own distributors? Did you or your attorney insert a "buy out"clause in the event the company is sold? What recourse do you have? Zero!

Scenario #3: Let's say you are the same distributor, and you are generating $5.3 million dollars in revenue and the company decides to terminate your agreement, only to find out that they replaced you with a scrub technician at a salary of $60 thousand per year, what recourse do you have? Did you or your attorney address and insert specific language in your termination clause? What recourse do you have? Zero!

Most companies that hire independent distributors demand quotas. It is important that you as a distributor forecast a conservative budget, especially if you have never seen the company's product used intra-operatively. How many times have you agreed to distribute a product only to find out that the instruments and implants have shortcomings in their design and utility? Does the company ever take responsibility for poor designs? Remember, most companies insert provisions that allow them to terminate your agreement if you do not meet your quotas. In addition, most early-growth stage companies have provisions requesting an annual forecast by September or October for the proceeding fiscal calendar. TSB has always been ambivalent about quotas. Retrospectively, quotas were originally used by companies that hired direct reps that had bonuses attached to their quotas. Ironically, most early-growth stage companies do not pay bonuses unless specified in a contract.

So why is this important? Based on today's environment where most company's look at you as a commodity, it could be detrimental to your health and livelihood if you do not take the time to have a legal professional evaluate the language and provisions in your contract. PS: If you think that any of the aforementioned scenarios never existed just ask one of your friends. TSB wants to know what its readers think?

Eden Spine: Claims It Has Developed an Intelligent Device

The origin of the word Eden comes from the Hebrew translation for delight, the Sumerians used the word to refer to arid lands west of the Euphrates, TSB wants to know is Eden arid or lush? On October 21st, Eden Spine announced that it had received its CE Mark for its Perfx2 dynamic stabilization rod. Yet, TSB must ask, who is Eden Spine and how big of a company are they? Based on published reports, Eden must be another physician backed organization that was initiated by a relationship between physicians' and distributor.

The company is quoted as saying that their device, a proprietary dual spring will remove pain by stabilizing the affected spine segment, control motion and abnormal load, and reproduce the kinematics of the segment. Yet, TSB must ask, "how does a device adapt itself to the motion characteristics of each individual patient?" This is an interesting claim!

TSB must speculate that with the FDA mandating additional post-marketing data on dynamic stabilization devices, that early-growth stage companies like Eden are in need of additional capital. The question remains how much? If it is less than $5 million they are going to have some challenges in raising this from an outside investor unless they approach Angels or individual investors. There are many lessons that can be learned from what has transpired during the last year in our industry. TSB wants to know what our readers think about this company's device?

This Week in Spine.

On Thursday, October 29th, Trans1 will be releasing its QIII results. TSB speculates that the number will not fall as short as expected. The major problem that looms as an obstacle continues to be reimbursement. Even though the company is addressing this from an educational standpoint, they still have a bit of a road to travel.

TSB has spoken to a few analysts, who are not as high on the company succeeding as some of the better known names in our industry. In addition, there have been recent reports of "pilot error" in implanting this device. So fasten your seat belts and sit back, let's see what one of the company's that has been projected as an up and comer has to say this week. TSB wants to know what our readers think?



Friday, October 23, 2009

Orthovita: The Sky's the Limit!

On Thursday, October 22nd, 2009 Orthovita announced results for third quarter earnings. Product sales were $22.3 million which was an 8% increase over product sales for the third quarter in 2008. The company also reported that aggregate sales for the first nine months of 2009 increased an incredible 22% to $68.5 million compared to $56.1 million for 2008. Cortoss accounted for $400,000 in new sales revenues.

Sometimes our readers must wonder what is Wall Street thinking about when you look at the drastic fall in VITA's stock pricing since the ridiculous government backed study on Vertebroplasty was published. TSB sees this company picking up serious momentum with Cortoss as it continues to educate surgeons and patients on the long-term efficacy of the material. TSB must congratulate Koblish and his team for sticking to their strategy of being a bio-materials company and not being tempted into the hardware market. Remember the Osteotech fiasco! If anything TSB can see this organization evaluating potential opportunities for acquiring additional complimentary biomaterials to further enhance their position as a biomaterials leader in orthopaedics and spine.

Congratulations on a job well done!!!!!!

Thursday, October 22, 2009

Investors Are Hanging on to their Cash!

On October 13th, AdvaMed held a Med Tech Conference in Washington, DC. By the looks of it, the medical device industry is battening down the hatches when it comes to the future. The global recession and regulatory changes are creating uncertainty for companies and investors alike. With changes to the 510(k) program that will inevitably increase time. cost, and risk in receiving product clearance , reimbursement uncertainties witness, along with legislation requiring full disclosure of industry payments to surgeons the industry is in desperate need of redefining itself.

When it comes down to capital, investment modeling will in all likelihood mean forecasting more capital than ever before, which in turn will mean having to give up more equity. These changes are going to impact the investors' return and likely lead to more scrutiny by investors. That's a good thing! The global recession is here, and its not going away regardless of what happens on Wall Street. Companies with top heavy salaried executive management teams will have to demonstrate financial efficiency if they are to survive. Meaning you cannot pay yourselves like if you were running Synthes or Danek!

With the inevitability of healthcare reform, companies are going to have to come up with innovative products, that cost less to manufacture and sell. The old way of doing things will not stand up to the test. It will take creativity. Investments for the first six months in 2009 in comparison to 2008 is down by 59%. IPO's are scarce, considering that the medtech sector has not had an IPO since QI of 2008.

So what does this mean? The industry will continue to be led by the Spine Cartel meaning that there will be incremental improvements in technology considering that most of these Elephants don't have the wherewithal to organically design their own products. But opportunities will exist for investors' to gobble up some of these smaller companies at fire sale prices. Even though our industry has fared a little bit better, we still have a long way to go. And remember what my mentor once taught me; "It's better to get something than nothing in return for your investment." TSB wants to know what its readers think?

Custom Spine AVID: Three Years in the Making

Custom Spine announced that it received 510k approval from the FDA for the commercial launch of the AVID. Wasn't this product shown at a 2006 spine meeting in Washington, D.C.? As per their press release the AVID is an articulating TLIF device consisting of three intra-linked spacers.

Lew Bennett was quoted as saying; "we are excited to bring this unique interbody spacer to the market and BELIEVE THIS DEVICE MAY FACILITATE A QUICKER RECOVERY FOR THE PATIENT WHEN COMPARED TO TRADITIONAL TLIF." REALLY? Most of us didn't know that Bennett was now performing surgery. These are the type of comments that need to be reined in. It's almost as bad as Larry Khoo being quoted saying; "Minimally Invasive TLIF using hydrosurgical tools reduces post-op complications to conventional methods while producing SIMILAR FUSION RATES TO BMP."

Anyway, it will be interesting to see if Custom can build some traction with this product considering that it has become known as a company for decreasing commission rates and firing successful distributors only to replace them with scrub technicians. Only time will tell! TSB wants to know if our readers are ready to articulate?


Vertos: Is This an Illusion, or am I losing my Mind?

Recently, Vertos announced that it had completed $15.5 million in Series D financing. A tremendous achievement in this economy and a testimony to the management team. But STOP right there, before we go any further based on their website video TSB must ask the $15.5 million dollar question; "What's the benefit of this procedure?"

After many years in the industry and spending many days in surgery and spine conference it was always my understanding that lumbar spinal stenosis was attributed to a collapsed or herniated disc. If our readers agree with this observation, how many of you have ever seen a CT where a herniated ligamentum flavum was the cause of stenosis? If a surgeon removes the ligamentum flavum and lamina isn't the disc still cooking?

Most patients that present with pain usually have nerve root compression. The conpression on the nerve root is usually emanating pain as a by product of the herniated disc not because of a herniated ligamentum flavum. Am I missing something here? Patients' are usually treated conservativelywith steroid injection, pain medication and bed rest. How many of the estimated 900,000 lumbar spinal stenosis sufferers are candidates for this procedure? Why not have a discectomy and get it over with since the size of the approach is thumb size?

One of my colleagues and I were discussing this technology and both of us agreed that an investment of a few million might be worthy, but $15,5mm? TSB speculates that these investors were either sold a bill of goods, or they know something that we don't after being so many years in this business. TSB must laud the Vertos team for one thing, they were able to get a billing code for this procedure! TSB wants to know what our readers believe and think? If there are any surgeons reading our blog, we would welcome your opinions.

510(K) Approvals for September 2009

Atlas Spine: Atlas Spine Spacer
Bacterin International: Osteoselect DBM Putty
Blackstone Medical: Firebird Spinal Fixation System
DePuy Spine: Modification to Expedium Spine System
Globus Medical: Modification to Beacon Stabilization System
Gold Standard Orthopaedics: Gso Pct Spinal System
Medtronic Sofamor Danek: Modification to CD Horizon Spinal System
T2 Spinals System
Perimeter Interbody Fusion Device
MTF: DBX, DBM Putty
Signus Medical: Diana Fusion Cage
Spinal USA: Spinal USA Interbody Cages
Spine Wave: StaXX XD System
SpineFrontier: Dorado Wide Intervertebral Body Cage
Stryker Spine: VLift-S Vertebral Body Replacement System
Mantis Redux Spinal System




Wednesday, October 21, 2009

How Low Will They Go?

$800 -$900 for a cervical plating, $1,200 for 10cc's of bone grafting material, $2,500 - $5,000 per single-level lumbar fusion? Recently, TSB was discussing pricing with a few colleagues, when one of the participant's asked, "Where does this stop?" It has become apparent that what was once thought to be isolated scenarios in markets like, Boston, New York, Washington, Detroit, Chicago, Los Angeles and San Diego is now beginning to pick up steam in other parts of the country. Medical Device companies and its workforce are beginning to see a shift in their ability to negotiate fair market prices in order to sustain and maintain market share. Isolated as this may be, it is a matter or time before it proliferates the rest of the country. We are witnessing the last vestiges of an industry that once had the power to negotiate and dictate pricing to the hospitals. Granted, there are some areas in the country where insane pricing exists. Occasionally, we hear stories of distributors charging $4,000 dollars for 10cc's of bone grafting material, or $1,200 -$1,400 for a pedicle screw but those days are coming to an abrupt end. Besides, most of these deals are at smaller facilities where in all probability the distributor and surgeon have a deal. TSB sees this coming to an abrupt halt as the DOJ, FBI and the insurance industry continue to ramp up investigations into alleged improprieties and bogus billing codes.

Like any industry, hospitals spend a lot of time comparing cost with each other. Just as the insurance and spine industry shares information at meetings and discuss strategies, hospitals are doing much of the same. It's a war of survival! What a hospital pays in Maricopa County is no longer a secret to someone in Miami. To paraphrase Tom Friedman, the spine market is flat, hot and crowded. We will pay for our sins! The Spine Cartel has the ability to negotiate better pricing by leveraging other areas of their portfolio. An example is Stryker, an organization that has been know to slash pricing in exchange for "pull thru" business that they offer in med-surg, sports medicine, total joints, biologics or trauma. In addition to Stryker, companies like Biomet, DePuy, Synthes, and Zimmer have set the bar. We don't have to worry about socialized medicine because the industry and distributors will price the smaller companies out of the market, and if it isn't the Spine Cartel, it will be the distributors.

TSB would be interested in having its readers share some of the pricing challenges that they are facing on a daily basis. Let's face facts, we have commoditized the market! How many companies offer Cervical Plates, Cervical PEEK, Pedicle Screws, Anterior Lumbar Plates, ALIF, PLIF and TLIF's? Why is one company's product any better than another's? There is no one "Ferrari" when it comes down to the aforementioned products. Yes, maybe some of the instruments make a difference, but if you are savvy and responsive anyone can make modifications to an instrument to appease the surgeon. Today, the industry has sixteen dynamic stabilization systems with numerous waiting in the wings and counting. This week alone we heard of a few new dynamic stabilization systems. How many lumbar and cervical discs are there? Everyone claims that there device is better?

The challenge that most of the early-growth stage companies have is forecasting future revenue and the type of capital that they will need to bring their IP to the commercial market. The only caveat that we offer is that the investment community holds the keys to the emerald city, and its now going to cost you more in equity to get the capital you need. TSB wants to know what our readers think?



Tuesday, October 20, 2009

NuVasive is HOTTTTTTTTTTTTTTT!

By the looks of today's quarterly earning reports, Alexis Lukianov has Nuvasive on a roll!!!! Rocking revenues were up 42% in QIII '09 vs. '08. Revenue was $94.9mm, gross profits were $76.5mm, gross margins were 81.8%, operating expenses were $70.4mm, the company reported net income of $5.1mm.

What can you say about success? Lukianov has put together a first class team with exceptional regional managers (aka "the lieutenants) that motivate and drive the sales team (the foot soldiers). The only thing TSB has to say to Lukianov is drink a a few less bottles of Araujo and reward those guys. They're driving the business!

NASS November 10-14, 24 and Counting!

On November 10th, the 24th annual North American Spine Society meeting will take place in San Francisco. Oh, I could hear Tony Bennett singing in the background........It is quite evident that we will be missing the presence of a few hardware companies, R.I.P. Yet, we will also be introduced to a few new players, some hardware and some software (biologics) companies. It will be interesting to see whether the Spine Cartel, aka Medtronic, DePuy, Synthes, NuVasive, Globus, and Zimmer continue to carry the torch exhibiting the largest per square foot booths that the industry has seen. Will the industry scale back on entertainment based on what transpired at the AAOS this year, or will we be defiant? Who knows, maybe we will have a few "federalis" walking around in disguise, evaluating what is going down at some of the booths?

TSB can inform our readers that if the timing is right, we should have at least one company announce that it is being sold, it's the law of averages. But the question always remains "will the price be right, or, will it be another fire sale?" Obviously, there will be plenty of rumor and innuendo. There will probably be many more early-growth stage companies evaluating the potential of developing an alliance or partnering with those whose portfolio's will compliment and allow them to sustain their existence. Cash is tight!

So polish up those shoes, press those shirts, suits, and dresses, and get ready for four or five days in the greatest city in America. " I left my heart in San Francisco, high on a hill, it calls for me, to be where little cable cars, climb half way to the stars......." PS: Book a table at Chez Panisse over in Berkeley, the Zuni Cafe or Aqua's.

Superion ISS - Is Vertiflex Transforming Itself?

Superion : the first Autobot that was created from five smaller robots who are able to transform into fighter jets and planes. Superion had two major objectives, one to destroy the Deceptors (Spinal Stenosis) and to protect others (patients).

Recently TSB ran across an article that was published in the "read Media Newswire" that SUNY Upstate Medical Center in Syracuse, New York was recruiting potential patients 45 years of age or older who have been diagnosed with moderate lumbar spinal stenosis, and whose symptoms include leg pain, buttock pain, and or groin pain that is relieved by either sitting or bending forward. Sounds a little like the criteria for the X-Stop?

Yet, TSB was wondering whether they should have included, "that are unable to walk more than fifty to sixty feet before having to sit down." So what is this product? It was 'dubbed" Superion ISS and the device was designed and manufactured by Vertiflex. So who is Vertiflex? It is a company that is comprised of former DePuy Spine and Interpore Cross employees.

The word on the street is that there was an across the board house cleaning last fall/winter when Earl "the Pearl" Fender took over as the President and CEO (unfortunately he doesn't have a jumpshot like the real Pearl). After performing some due diligence on this company we found out that the company has been swimming against some strong currents. It has been reported that they are having challenges increasing revenue. Could this be that the portfolio is truly not that impressive? In addition, it doesn't help your reputation when you run people out, after taking over the company.

Obviously whomever came up with the name must spend much time playing Transformers in their office. Who knows what their next product will be called, Air Raid, Firefight, Silverbolt, Skydive or Slingshot. You know you have no creativity when you start naming your products after characters from the Transformers. TSB wants to know what our readers think about this product?


Monday, October 19, 2009

Titan Spine: Are they Going to the Moon or Will They have a Rough Landing?

In 2007 Titan Spine launched its first product called the endoskeleton VBR. The design rationale behind the device was to provide surgeons' with a large graft window, x-ray visualization and proper stress transfer through the apophyseal ring. But TSB must ask was the design of this product truly innovative? To our knowledge, etching techniques have been used in various orthopedic and dental applications.

This past August, the company announced the launch of a new TLIF device with commentary from user surgeons on how wonderful this product performed. There is no question that a large surface to bone contact area is beneficial with a generous graft reservoir, but what is the benefit of a titanium interbody device? One of TSB's sources made the best observation, why would anyone want to go backwards in developing new technology? If you were the patient and had a choice of bone, PEEK or a titanium interbody device what would you choose? TSB wants to know what our readers think of this product and the company?

Ozone Therapy: Is this the Silver Bullet for Herniated Disc?

In 1856, ozone (O3) was first used to disinfect operating rooms, in 1892 The Lancet described the use of ozone for the treatment of TB, during the WWI physicians applied it to infected wounds and found out the it had hemodynamic and anti-inflammatory properties. So where is TSB going with this article? Ozone chemonucleolysis was pioneered over fifteen years ago in Europe, but has not been widely adopted in other markets and the U.S.. Chemonucleolysis is a medical procedure that involves dissolving the nucleus pulposus in an intervertebral disc by the injection of an enzyme known as chymopapin. As most of our readers know, herniated disc affect over a million patients lives annually. Steroid injections offer temporary relief and some patients usually end up having back surgery. So have we arrived at a "silver bullet moment" for the treatment of herniated disk?

There is a company by the name of Minimus Spine, based in Austin, Texas that claims that it has a strong body of evidence that suggests that injecting ozone gas directly into a herniated disc is a safe and effective treatment. The primary obstacle for global acceptance has been the lack of a reproducible dosing capabilities and clinical trials. By providing reproducible dosing and creating a treatment regimen, Minimus believes that it can address all the controversial issues that have faced this therapy. So TSB asks its readers, "can Minimus become the first clinically proven commercial ozone therapy in the U.S.? Is it the Silver Bullet and can this product be accepted and adopted, or is it too early to tell. TSB wants to know what its readers believe?


Friday, October 16, 2009

Walter Reed Medical Center: A Breedng Ground for Future Medtronic Consultants

If our illustrious government officials, aka Senator Grassley (R-Iowa) were truly interested in doing the spine market justice, all they need to do is drive down to the Walter Reed Medical Center in Washington, DC and review purchase orders to really see the financial interest that Medtronic has at this facility.

TSB is not going to name names, but for those of you that have attempted to sell or have sold in the Washington DC area, taking a shot at getting your business into this facility is like taking a shot at breaking into Fort Knox. Let's face facts, Medtronic has used this facility as a breeding ground. TSB does not have to change the names to protect the innocent. This has been going on for many years. We know who you are!

The unfortunate result of this investigation is that it does not go back far enough to implicate those that have served their time working for the government that have reaped the financial benefit of aligning themselves with Medtronic. How absurd is it that highly educated individuals develop a sudden lapse in memory, or deflect the blame on some perceived bureaucratic flaw? If it was some drugged out, alcoholic bum, TSB would give them the benefit of the doubt, but an educated surgeon, mind boggling. Is there no honor amongst thieves?

In response to the ongoing promotional work being done by spine surgeons across the country, TSB suggests that at this years meeting NASS mandates that all surgeons' working as a consultant or having a vested interest in any company must wear a shirt with each company's logo so that we don't have to waist our time talking to them. It would make life a lot simpler! TSB wants to know what our readers think?


Washington U Panel Completes Investigation into Kuklo's Study

On October 15th, 2009 the Barry Meier of the NY Times reported that an academic panel at Washington University had completed its investigation into the research study that Timothy Kuklo, M.D. had performed while a surgeon at Walter Reed Army Medical Center in Washington, DC.

The controversy surrounding this study centered on Army officials accusing Dr. Kuklo of inflating the number of combat soldiers whose leg injuries were successfully treated with INFUSE, a bone morphogenic protein (BMP) marketed by Medtronic. In addition, to these accusations, military officials found that Dr. Kuklo had voluntarily forged the names of four other Army doctors before submitting the study to the British Journal of Bone and Joint Surgery (JBJS).

Now here is where the findings get interesting. After a lengthy review, the panel concluded "that it had been possible for Dr. Kuklo to support the number of leg injuries he reported if such injuries were defined broadly," So what does Kuklo's attorney do, he sends Senator Grassley (R-Iowa) a letter describing the panel's findings as exonerating his client. A spokesperson for Washington University counters by stating that Mr. Dane (Dr. Kuklo's attorney) misrepresented the panel's findings by selectively citing from it in his letter to Grassley.

The spokesperson for Washington University said, "that even though the panel's review had found insufficient evidence of research fraud," the findings did not exonerate him of misconduct in connection with the forgery of the other doctors' names on the study. Dr. Kuklo's defense has been that he included the other names as a courtesy and had no intention of misleading anyone. The Washington University panel disagreed, finding that Dr. Kuklo had intentionally used "four different" hand writing styles suggesting intentional deception. As a result of this investigation Medtronic suspended his consulting agreement.

In closing, Washington University has no intention of reinstating Dr. Kuklo since he had tendered his resignation. So TSB asks its readers, what was accomplished by this kangaroo court led by Senator Grassley? Has he made the industry any cleaner? Has it changed our perception of Medtronic, aka "the Evil Empire?" And what about Dr. Kuklo? Should the industry lose a surgeon whose skills outweigh his poor judgement? How can our readers' not be cynical and jaded? Until the DOJ prosecutes the real criminals in our industry those that use graft as a sales tool, Rome burns while Nero fiddles.

Thursday, October 15, 2009

Has the Spine Market Overheated and Is It Ready to Cool Off?

Recently, one of our readers expressed curiosity about who is investing in the spinal implant industry. TSB thought it would be interesting to evaluate what has happened over the last few years. The questions that still needs to be answered are, has the market overheated, and is it ready to cool off?

It has been reported that since 2006 investments in companies with treatments for spinal disorders was $769 million, 44% of the deals or 36 spine companies raised $250 million over the past 18-24 months. Yet these totals were skewed by the $110 million that Globus raised in 2007. In 2009, there have been two major spine deals, SpineGuard SA raised $15 million in Series A, and Paradigm Spine raised $23 million in Series E-1. But has the pendulum swung?

It is evident that start-up and early-growth stage companies are having trouble raising capital, especially if they are looking to develop additional "me-too" products. This is evident when most of them are surviving on a line-of-credit, hoping to meet their banking covenants, or depending on investors to guarantee loans. The perception by the investment community is that many of these companies have unrealistic expectations, lack stability, have over inflated valuations and are led by poor executive management teams. Look at the companies that failed in 2009, Archus and IST lost more than $140 million dollars. Inion, Pegasus and Vertebron took honorable mention. Look at the early-growth stage companies that seem to be stuck in quick drying cement. Are investor willing to pump more capital into companies that have raised tens of millions of dollars over a four to six year period, only to find out that the venture is generating $2-4 million in revenue?

Many individuals in our industry do not understand how savvy investors are. They are not impressed by companies whose revenues are leveraged by surgeon investors, surgeon owned distributorships, or distributor bought surgeons. They want to know whether you have legitimate market share. They are looking for an investment opportunity that has staying power. Investors know that success comes from perspiration, not inspiration. Too many individuals are quite impressed with themselves, and that doesn't cut the mustard with investors. If your company is going to succeed it is going to take long hours. They will look for individuals that understand risk considering that every young company has twists and turns, in other words, do you have the capability of analyzing a situation, evaluating the probability of success, and implementing a game plan. Can you articulate an idea, and, are you detail oriented especially when it comes to the numbers. But the biggest denominator is whether or not you are compatible with the investor, remember most people don't get married unless they like one another.


So, where is the new frontier for investment capital? TSB believes that many investors are performing due diligence on many of these early-growth stage companies to determine whether there is anything worth their while to invest in. And it seems that no one is interested in more "me-too" products unless there is some "real" emerging technology in the IP portfolio. Let's be realistic, with the current state of our national healthcare reform debate, any smart investor is sitting on their capital. It seems that investors are looking at expanding bio-materials and stem cell technologies based on some of the recent acquisitions by NuVasive of Progentix Orthobiology VS and Osteocel from Osiris. The hardware market is overcrowded, overheated, and overhyped! Since TSB is not a commercial venue it doesn't behoove us to promote any specific VC, private equity fund or investment bank but there is money out there, the challenge is developing a product that will make a difference to the patient, is not looking for an indication and can generate revenue. TSB wants to know what our readers think?

Wednesday, October 14, 2009

The FDA Orders Dynamic Stabilization Companies to Collect Data

On October 5th, the FDA ordered 12 spinal implant manufacturers to initiate collecting post-market data on how well their dynamic stabilization devices fare in doing what they were cleared for, as an adjunct to spinal fusion. The 16 dynamic stabilization systems include;

Zimmer Dynesys DTO
Medtronic CD Horizon Legacy and Agile
Scient'x Isobar
Paradigm Spine DSS
BioSpine BioFlex
Globus Medical Protex and Transition
DePuy Expedium Polymer Rods
Synthes Spine Ngarde
Alphatec Zodiac
Applied Spine Stabilimaxx BAR
Ulrich Cosmic and SSCS
Vertiflex Dynabolt

The FDA is establishing a new post-market requirement and asking for pre-market data to be included in future 510(k) submissions. Under this new order, companies will need to collect data on the rates of fusion, adverse events and additional surgeries as compared to traditional pedicle screw fixation. The onus is being placed on these manufacturers to determine the cause of device failure.

Based on the post-market data, the FDA will consider whether labeling changes or additional requirements will be necessary to move forward. At this juncture there is no time table for data collection requirements. The FDA invokes its authority under Section 522 which allows the agency to mandate post market data collection under threat, fine or seizure.

Is the Spine Cartel violating your First Amendment Rights?

The First Amendment was adopted on December 15, 1791 and it states; "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

So why is TSB writing about the First Amendment. Recently, it was brought to our attention that companies in our industry are now starting to insert provisions in their employment contracts that prohibit the employees from blogging in their spare time. This is quite disturbing, considering that for the first time, this industry has a forum where participants provide intelligent and knowledgeable information in real-time (at no-charge), using a platform that is not biased or has any financial interest (advertising revenues or investment capital) in the companies, or people that it writes about. We are proud to say that we even have patients and patient support groups following our blog and our readers' commentaries.

Obviously the impetus for these mandates stem from blog sites like "CafePharma" where anonymity is in vogue, because of vulgar and vile comments. The interesting thing is that many of the comments made about some of the industry's well-know sociopath's and recidivist's are well deserved. As I have said in previous blogs, it takes less energy to be nice than it does to be mean and nasty to people. Unfortunately, our industry prides itself on being unprofessional. Leadership, team work, out-of-the box thinking are buzz words that we like to use to impress others that we work in a progressive industry. If you read TSB our objective is never to slander anyone or use untruths to harm others. Our motto is "we want answers and we want the truth." And as Colonel Nathan R. Jessep said in a Few Good Men, "You can't handle the Truth!"

S0 in closing, keep blogging, because as most of you know, you can preserve your anonymity. "I have neither the time nor the inclination to explain myself to any person that rises and sleeps under the blanket of freedom (freedom of speech) that I provide, and then questions the manner in which I provide it. I would rather you just said thank you, and went on your way."

Trans1: October 29th Day of Reckoning

October 29th looms as a big day for Trans1. On that day, the company will release its full third quarter results. Earlier this month, the company announced that revenues were expected to fall short of previously announced guidance for the quarter. So why the concern? Like most readers, TSB is concerned that this could be perceived as the beginning of a trend for this company.

Even though this company has exhibited nice growth, they are not meeting the Streets and their own expectations. But that happens when you dance with the devil. The primary reason that this company has lost some traction can be attributed to reimbursement issues surrounding their flagship product. Most of our readers understand that when surgeons cannot get reimbursed for using product, they stop using product. Trans1's challenge is to get this device down classified from a Category III CPT Code (aka an experimental device) to a Category I, meaning that insurers will not pre-approve the procedure or pay the code. TSB is sure that this organization is working feverishly to overcome this obstacle. This company has managed their cash flow very well, considering, they have opted to build their business model with a direct sales force.

But there are other concerns, if you track their stock (TSON, NASDAQ) the share price has taken a beating over the past year, affecting the companies market cap and valuation. On October 13, 2008 the stock opened at $8.57 and closed at $9.54, jumping as high as $10.03 on October 17, 2008. As of October 13th, 2009 the stock officially closed at $4.52 per share. The question must be asked, are investors losing interest in Trans1? If this company is projected to finish '09 with an estimated revenue of $30-$35mm are they doing a great job, or, do other factors loom that our readers are unaware of . The Spine Blogger wants to know what our readers think?

Phantom Product, Phantom Company, U.S. Spine

Recently, OTW published an article on the launch of U.S. Spine's Phantom Plus interbody devices. But this blog is not about more "me too" products flooding a "zero-sum" market because there is nothing innovative about the product, and it is evident by this article, a lot of confusion exists at this company.

So the question must be asked; "Is Paul Sendro really the Messiah, or, is he the Vice-President of Sales and Marketiing, or, is he really a consultant? Can anyone at this company get their story and act together? To quote one of our sources, "how can you be in two places at once without being any place at all? The answer is, U.S. Spine.

If the confusion lies in U.S. Spine's inability to offer Sendro a palpable employment contract, what does that say about the company? How long has he been there? Many of these early-growth stage companies get themselves in trouble because they really do not possess the necessary skills to take their venture beyond a certain point. How interesting is it that the organization would tender Sendro a board seat as a consultant? I guess our industry is always setting new precedents. If Doris Blake believes that the company is primed for tremendous growth, why would she need Sendro? With his reputation and past affiliations, there are many more talented people in the industry.


Monday, October 12, 2009

Thanks to our Readers

TSB would like to thank our readers for their continued support of our blog site. We are proud to announce that in September we achieved a new milestone. We had over 5,000 readers. In addition, we have had numerous e-mails from patients, surgeons and industry professionals. Your feedback is important to our continued success. Remember, if there are any questions or concerns that you have, you can contact us at spineblogger@me.com

Let Your Voices Be Heard!

Why are We Expanding Orthopedics?

Recently, one of our readers e-mailed TSB regarding a company by the name of Expanding Orthopedics. After carefully reviewing their website, our favorite set of questions came to mind; is it new, is it true, and will it make a difference? With the commercial launch of another pedicle screw system, the industry now has 550 pedicle screws and counting. But the bigger question looms; why in God's name do we need another pedicle screw, let alone one that expands? Is this truly novel technology?

Historically, the first implant designed that had expanding capabilities (no distal locking bolts) was the Biomet Brooker-Wills Nail. For those of our readers that are not aware, EO is not the first Israeli Company that offered the industry expanding locking capabilities. Disc-O-Tech (now defunct, sold their IP to Kyphon) was the first Israeli Company that brought an expanding humeral, tibial and femoral nail to our market. They attempted to use surgeon consultants from The Hospital for Special Surgery in New York City to no avail. So why do we need an expanding pedicle screw?

I suppose the argument will be made that this will benefit the surgeon when treating a patient with osteopenic bone. Yet, TSB must ask; based on the current state-of-the art, are surgeons having trouble with pedicle screw that don't expand? I think not! TSB believes that most of the people involved with EO are probably very nice people, but the question must be asked, why now? For those investors that infused capital into this venture, if your money was burning a whole in your pocket you can always make a charitable contribution to TSB. What do our readers believe, what do our readers think?

Sunday, October 11, 2009

Silicon Nitride - Is it all an Illusion?

With the upcoming NASS Meeting in San Francisco on November 10-14th, 2009, TSB was reviewing products and companies to identify any innovation and emerging technology. While reading OTW, I was fascinated by an advertisement that says; "Silicon Nitride Proven Under Such High Stress Conditions as the Space Shuttle, Jet Engines, Race Cars and now Spine!" So we decided to perform some due diligence on Amedica and their products.

First and foremost, what is Silicon Nitride (Si3N4)? It is a hard ceramic with an exceptional modulus of elasticity, it is inherently resistant to fracture and has superior wear resistance. It has been used in gas turbines, automobile engine components, and has been used in the main engine of the NASA Space Shuttle. This material has a ceramic substrate, a substance acted upon an enzyme, that produces a chemical change, acting as a catalyst, mimicking natural cancellous bone.

Amedica's claim to fame is developing Si3N4 for a Spinal Spacer that is 20% stronger than PEEK, it is radiolucent, and does not produce MRI or CT artifact. But the question must be asked; Has anyone in the industry had a problem with PEEK? If anything, INVIBIO needs competition to drive down the cost of their license, which is an estimated $225k over a three year period and material? Up until this point, they have had a monopoly. So what challenges does a company like Amedica face?

First of all, their product portfolio is made up of "me-too" products. Does the industry need another pedicle screw and cervical plate? Probably not! Though their interbody devices are manufactured with Silicon Nitride, to our knowledge, no one has complained about the performance of PEEK interbody spacers. There could be a potential financial advantage that this product could offer if this material is cheaper than PEEK. The TSB would be interested in knowing what the comparative cost is between these materials.

In closing, the rumor on the street, and that is strictly a rumor, is that this company has been challenged in developing traction in the marketplace. TSB is not sure that the newest addition to this company, Ben Shappley has the firepower to get the job done. The TSB wants to know what its readers know about this product and what they think?

Friday, October 9, 2009

Disclosures Reported by The New England Journal of Medicine

On October 8th, the New England Journal of Medicine published an abstract entitled; "Accuracy of Conflict-of-Interest Disclosures Reported by Physicians" based on a survey taken at the AAOS Meeting in San Francisco.

As Americans' become more aware of "payments made to physicians," a by product of the DOJ's settlement with Stryker, DePuy, Smith and Nephew, Biomet, and Zimmer, the authors of this special article believed that this provided them with an opportunity to assess the accuracy of physicians' conflict-of-interest disclosures. The authors posed an excellent analysis as to their concerns. These included that the investigator/physician may have a financial conflict of interest in their observations, potentially suppressing negative results so that a company can commercially benefit from a biased study design, and they questioned the ethical behavior of the investigators.

The most notable finding of this abstract was the high rate of non-disclosure. During 2007, the fact remains that 1347 payments were made to 1162 physicians, in which 166 physicians received multiple payments from multiple companies. 147 physicians received payment form at least two companies, 18 physicians received payment from at least 3 companies, and 1 physicians received payment from at least 4 companies. The overall disclosure rate was 79.3%, while the non-disclosure rate was 20.7%. 282 physicians received payment that exceeded $100,000, and 47 physicians received compensation in excess of $1 million.

TSB wonders what these figures would look like if NASS did an analysis of all the surgeons that are on the payroll of various spine companies? We had the opportunity to review 2007 and 2008 NASS programs for the last few years, only to determine that we could have a field day. TSB realizes that some of our readers are compelled to question our intentions. But let's face facts, even if you have a great product, how do you sell in a market when everyone is on the take (a nice commentator on the ethical behavior of surgeons and distributors). Recently, one of our readers told us of attempting to sell a product to a group of surgeons', only to find out that the surgeons' had invested into a competitor's company. What if the product is not as good? Is the patient getting the best product? Possibly? And, then the bigger question must be posed; "Is the surgeon the gatekeeper and advocate for his patient, or, is he or she a slave to their master, the company or distributor that pays them?"

The unethical actions of a few, will come back to haunt the industry, it's inevitable. TSB wants to know what our readers believe?




Thursday, October 8, 2009

Hydrocision - Does it Really Produce Fusion Rates Similar to BMP?

Hydrocision reported a 43% increase in revenue for QII of 2009. Yet, as any good observer, TSB must ask, "43% of what?"

Last year, Doug Daniels downsized the company's sales management team, leaving two regional managers in place, and demoting Steve Van Tyle, then the VP of Sales, to a Regional Manager looking to minimize its operating expenditures. Since Hydrocision is a privately held company, one can only speculate what existing sales are on a six-year old company that has raised $28 million in investment capital. Yet, if I were a betting man, I would estimate that the company will finish 2009 at roughly $2-$4 million in U.S. revenues. If correct, not a stellar performance for a company that touts its product as being innovative.

Basically, the company's growth is plodding along at a snail's pace. So why does anyone think that there is a problem? Could it be that there is no billing code for the product? Could it be that their "burn rate" far exceeds their revenue stream? Could it be that distributors are more interested in products that generate large commissions versus measly dollars? Industry sources reported that the company was having trouble meeting its payroll when the downsizing occurred.

If our readers believe Larry Khoo, M.D., the PT Barnum of Spine Surgeons, "Minimally Invasive TLIF using hydrosurgical tools reduces post-op complications to conventional methods while producing SIMILAR FUSION RATES TO BMP." Similar fusion rates to BMP? Are you kidding? Obviously, when the company agreed to this press release, it did not notify the public that Dr. Khoo is a medical advisor and in all likelihood a consultant for the company, but whose company isn't Larry a consultant to?

Round n' round we go, and where this company ends up nobody knows. One common denominator is that there is a connection between Custom Spine and Hydrocision based on the fact that "Demolition" Lew Bennet, an Octogenarian is actively involve in both companies. Could Lew (I forgot what I said) Bennett be attempting to package these two companies in a deal? But who would want to buy a "me too company" and a company that cannot gain real traction after six years? TSB wants to know?

Wednesday, October 7, 2009

$1.3mm - $29.5mm = A Negative ROI

The Spine Blogger received a call from an industry source this evening regarding the Vertebron/CardoMedical deal. Interestingly enough this is what was reported to us from someone close to this organization. Supposedly, Cardo offered Vertebron $29.5 million dollars. So if Vertebron generated $11mm in revenues that would be a multiple of 2.68 of revenue. Not bad, considering that last year our economy was in meltdown mode.

So why didn't the deal go down? Supposedly, one of the founders, a board member, refused to sign off on the deal! HELLO! We're talking $29.5 million, like in samolee's, like in banana's. So the outcome is that the company files for bankruptcy and the is sold in an auction. Now there's a stroke of genius. Today, the board is being sued by various parties. Now here is a case study for Wharton, Stanford, Kellogg, and the Harvard Business School.

You know, sometimes, just sometimes people are as dumb as a bag of rocks!

Tuesday, October 6, 2009

Vertebron Bankruptcy Sale Goes to the Highest Bidder! Was this a Surprise?

Late today, September 6th, 2009, it was announced that Cardo-Medical was successful in bidding on all the assets of the once gone, but never forgotten Vertebron, free and clear of all liens by the US Bankruptcy Court for the State of Connecticut. The purchase price was $1.3mm, now there's an exceptional multiple! Doris Blake of US Spine really hit the nail on the head when she said that Paul Sendro was instrumental in turning Vertebron around. Based on sales, TSB estimates that this is another example of a sale that resulted in a negative return on investment. Was this really a surprise, considering that this was a topic of discussion at the 2008 NASS Meeting in Toronto? The question really was, when, and how much was Cardo-Medical willing to pony up for such mediocre products? Now we know!

The Spine Blogger reached out to a few of his design colleagues to solicit their opinions on the Vertebron Low-Torque Pedicle Screw System (LTPSS). The consensus was that the Blocker, Rod, and Rod Persuader interface were not designed well, in addition, the company lost some of its early surgeon advocates due to their inability to modify some of the designs in a timely manner. Isn't this a reoccurring theme among most start-up/early growth stage companies? David Paul, where are you to teach these people some basics in responsiveness?

Is there a lesson to learn? Hopefully, no other start-up/early-growth stage company ever follows this business model, one that was predicated on stiffing its vendors, employees and investors. This was a company that was run on "truth or dare." Unlike the Three Wise Men of biblical lore in search of the Messiah, they were not men of integrity. They were seeking gold rather than the truth, never finding the guiding star that would take them to fame and fortune. Though their names were not Gaspar, Melchior, and Balthasar, they were better known as Affifi, Khalili, and Natarajan.

So today marks the beginning of a new era for Vertebron's products. Hopefully Dr. Brooks and COO Michael Kvitnitsky can make Beef Wellington out of chop meat. Good Luck!




Dynamic Stabilization, An Adjunct to Fusion? So What's The Difference?

Recently, OTW completed a three-part series on Dynamic Stabilization (DS) which was highlighted by the contribution of three esteemed leaders in the study of spine biomechanics, Drs. Panjabi, Goel and Patwardhan. Dr. Panjabi is respected as the "guru" of spine biomechanics, and was the visionary behind the Applied Spine Stabilimaxx NZ, while Drs. Goel and Patwardhan have provided bio-mechanical guidance and contribution to the development of other companies DS products.

The theme behind this series was to "better define" the design rationale behind the development of DS products and how it may benefit the patient. These scientists believe that somewhere in evolution of spine treatment there is a place for Dynamic Stabilization in the surgeons armamentarium. Yet, the question must be posed; "Is there really a middle road between total disc arthroplasty and fusion?" It is difficult to dispute the bio-mechanical findings that these scientist have developed over the many years of their lives studying the spine. Yet, today, the industry has many believers some genuinely sincere with academic intent, some who have drunk the kool-aid purely for financial reasons, and some that are skeptics. For those of us that are on the outside looking in, there are many questions regarding DS that need to be answered.

If the reader looks at the indictions of the five companies that are featured in this series, they may seem clear to the writer, yet, they are not patient specific. Yes, the indications are the same, "Adjunct to fusion in the treatment of chronic instabilities or deformities of the spine." To the reader, the terminology belongs to the state-of-the art, yet, it is nebulous and runs the gamut from "A to Z." Therefore, what are the appropriate indications, so that the surgeon and patient can optimally benefit from the implantation of these products? It seems that everyone involved in the development of these products spends more time on differentiating their individual design's features and benefits, rather than focusing on the patient's indications. If the leaders in DS haven't clearly defined, nor agree upon the theoretical aspect and optimal design, how can surgeons make the appropriate decision when they themselves agree to disagree?

Retrospective data tells us that surgeons that have used some of these products ultimately have had fusion (Dynesys) along with screw breakage (Dynesys and AST). In addition, inventors have experienced an evolution in the design and manufacturing process of their implants, witness by discussion centering on HA or Ceramic coated screws and dual shot peen vs grit blasting finishing. Eight to Nine years ago Total Disc Arthroplasty (TDA) was the future, I can still hear Tony Viscogliosi's hypnotic voice, then, the industry realized that there were far too many clinical variables on an individual patient basis, the industry moved in a different direction, interspinous process devices became in vogue, PEEK exploded on the scene resulting in the commoditization of interbody devices, facet replacement surfaced, today, the industry is selling Dynamic Stabilization as the new frontier. Yet, if all these devices are an adjunct or supplement to fusion why can't the industry agree on how to effectively use these products? Unlike the patient, the laboratory can be predictable, whereas, each individuals clinical diagnosis changes on a case by case basis. If Dr. Panjabi believes that structural preservation of the spine is important, how do we justify some of the other posterior designs, i.e. Impliant and Facet Solutions?

In closing, the Spine Blogger remembers sitting next to a surgeon at an emerging technology meeting, as the surgeon speaker was finishing his presentation, this prominent surgeon leaned over to me and said, "maybe if we resect as much of the anterior and posterior elements of the spine and replace them with hardware, we will truly eliminate pain!" Sometimes, the reader and the audience gets the feeling that we are still looking for the right indications. The Spine Blogger wants to know what its readers think?

Monday, October 5, 2009

Atlas Spine: Can They Carry The Weight of the Spine Industry on their Shoulders?

Atlas was the brother to Prometheus (Clay Baynham, M.D., the wise brother) and Epimetheus ( Matt Baynham, the indecisive brother). Maybe there was a sub-conscious reason why the company was named Atlas? Recently, the company launched a new pedicle screw system called the "Apelo" meaning to appeal or petition. The "Apelo" is a post system, that provides surgeons with 5.5mm, 6.5mm, 7.5mm and 8.5mm screw diameters with lengths starting at 25mm thru 60mm in 5mm increments, in addition the system has cross-connectors.

Atlas has been around for an estimated four to five years, and has Chet Sutterlin, M.D. as head of the Medical Advisory Board. Dr. Sutterlin has always brought a realistic approach to spine. Recently, the company enlisted Alan Olsen of Sofamor Danek fame to head up the companies search for additional capital. The word on the street is that Atlas has some interesting IP for anterior and posterior fixation. Though I have never seen it, I must take the word of our knowledgeable sources. The Spine Blogger would estimate that this company is generating $4-$6 million in revenues per annum. Like most early-growth stage companies, the Spine Blogger believes that Atlas is at a crossroads, in search of additional capital to take it to the next level. Their initial product the Verteview seemed to attract some attention, yet, by our analysis, this company needs cash to execute its strategic objective.

The Greek mythology character Atlas, was immortal and could not die, having to carry the weight of the world on its shoulders, the question is will Atlas be able to support itself? The Spine Blogger wants to know what its readers think?

AdvaMed: Another Lame Duck Organization

The WSJ reported that in an 11th hour scramble, the "Almighty AdvaMed" has petitioned Max Baucus, aka: "I've never seen an insurance company that I didn't like," to reduce the Medical Device Tax that was proposed over the next ten years to help fund the new healthcare program. AdvaMed requested that the tax be lowered from $40 billion to $15 billion. Supposedly, the Senate Finance Committee felt that the offer was too low. AdvaMed has already come out in defense of itself, stating that the counter offer was just a rumor.

As Medical Device Companies coalesce, the industry's rationale for not wanting to be a contributing party to a better healthcare plan is based on the tax cutting into their research and development. Some analyst have observed that unlike the pharmaceutical and hospital industries that came to the table this summer, as active participants in helping restructure some type of improved healthcare plan, the Medical Device Industry has not offered a viable concession.

Please take the time to read the article posted in "Orthopedics This Week" on September 18th, 2009, Robin Young makes a compelling argument on how this tax would benefit our industry. Unfortunately, our industry is led by the nose by an organization that has never lived up to its billing. Not only are these lobbyist late to the table, they do a poor job of negotiating on the industry's behalf.

How can anyone expect a lame duck organization to negotiate effectively when they don't have the legal power to enforce a Code of Ethics? Regardless, our industry is going to have to make some concessions. If not, we will be viewed as greedy, and we will be vilified. During the last ten years new devices have increased the cost of healthcare in this country. This is not a bad thing, considering how many patients have benefited from it. Yet, it always comes down to money. No one is willing to sacrifice at a time that the patient (healthcare) is on life support. Everyone complains how this will affect their ability to continue developing better products. Let's face it, there are many companies that haven't developed anything innovative in years.

The Spine Blogger's mantra is; "if you want to play, you have to pay!" Let's see what happens over the next week. This will determine how influential AdvaMed really is, or, are they really a lame duck organization. The Spine Blogger wants to know what its readers think?

Saturday, October 3, 2009

If GE Can Do It, Why Can't We?

On Friday, October 2nd, 2009, the NY Times reported that GE and Wipro, the third largest Indian information company, had struck a deal that will play a significant role in reducing US healthcare cost.

Jeff Immelt, CEO of GE rationale behind the partnership was, that healthcare products and services developed in India "will be exported cheaply to the US cutting prices." There are two reasons for Mssr. Immelt's enthusiasm. GE can export development and manufacturing to a country that has been steadily climbing the economic ladder by offering "cheaper labor" in comparison to the US, and GE can take advantage of India's overall business development plan in spending more on healthcare for its own people.

Analyst's forecast that by the year 2012, India will have a $75 billion dollar healthcare industry, while the US will spend an estimated $4 trillion on healthcare. Mssr. Immelt's rationale was that this strategic initiative would simplify GE's operations while allowing it to take advantage of a new burgeoning market. Simplistically said, India is the new frontier.

But wait a minute! Stop right their! Before we go any further, is this a sign of what the spine industry should expect when it comes to the development and manufacturing of its own products? As reported in a previous blog, Stryker/Osteonics initiated this in the late 90's when Brown, Simpson, and Lipes decided to move manufacturing to Ireland for tax purposes. Then we had Medtronic move manufacturing to Puerto Rico. As recently as a few months ago, under the auspices of Steve McMillan, it was reported that Stryker decided on expanding into India. In his most recent press release, Tony Viscogliosi alluded to setting up shop in Malaysia in exchange for a Malaysian investor's capital. Today, the spine industry has had an influx of Korean companies finding their way across the Pacific Ocean that are attempting to make inroads into the U.S. Healthcare Market, manufacturing products at a cheaper cost. So what's the Spine Blogger's beef?

What ever happened to developing, manufacturing, and buying American? Whatever happened to all those phony "lapel flagpin" gray hair blue suits who talk about loving America? In all the years that I have been in this business, the margins have always been exceptional, indicative by the over 300 spine related companies in our industry, and the behavior of the Wall Street analysts. The European and Asians still see America as a land of opportunity, even if they have trouble negotiating and understanding the American distributors way of doing business. Yes, my foreign friends, you still have a lot to learn! But this article is not about Xenophobia, it's about questioning US companies commitment to export more and more manufacturing overseas resulting in less and less Americans having job opportunities. Even though "supply-side" economist Milton Friedman has passed away, the torch continues to be carried by those loyal to his economic theories. Friedman, originally a Keynesian, became a monetarist believing in a natural rate of unemployment, and argued that the government could not micromanage the economy. But he also had a condescending opinion of Americans. He believed in advocating manufacturing overseas and "dumping" product back into the US, since Americans are "addicted to consumption." As a footnote, Friedman was the original Gordon Gecko, advocating that Greed is as inherent to us, as our DNA.

But this blog is not about debating economic theories, its about where new frontiers are developing, and what will happen to the old wild wild West (the US) unless we some how find middle ground on how this effects those of us on this side of the pond, as my English brethren like to say. I am always leery of any analyst's commentary when they state that these types of business decisions will lead to big changes in the US healthcare system. If American companies are cutting cost the rationale behind it is to sustain or increase margins for shareholder value. IT IS NOT TO CUT THE COST OF HEALTHCARE DELIVERY, indicative of how much we are forecasted to spend by 2012. If the analyst's definition of cost cutting includes reading x-rays and scheduling nursing visits, isn't this taking away American jobs? Who is going to control the quality assurance aspect if we eventually take ALL manufacturing overseas? The FDA? They can't take care of their own house! The companies? Just go visit some of the medical device manufacturing that is done is Mexico, you will be in for a surprise. Eventually, this will lead to an dramatic shift in the way the industry is perceived, all at the expense of the patient. The Spine Blogger wants to know what its readers believe?

Thursday, October 1, 2009

Whistle While You Work!

As the Federal Government works to resolve fraudulent practices in the spine industry, the Spine Blogger is wondering, where the mighty DOJ will strike again? On Thursday, October 1st, 2009 it was reported in various news outlets that six hospitals in Alabama and Indiana settled for $8 million dollars for overcharging Medicare every time they performed a Kyphoplasty procedure. No wonder Medtronic has been on the Grassley-Radar, not only has the "Evil Empire" been accused of buying surgeons (what a surprise in our industry) but they also were penalized for counseling hospitals to perform kyphoplasty procedures on an in-patient basis back in June.

Here's the $75 million dollar question; Have any of these GREEDY organizations learned to treat their employees respectfully, or, is it better to "screw" the little guy and have him or her come back and "screw you?" You know my granddaddy taught me an important lesson in life, "it takes less energy to be nice, than it does to be nasty." But here's the bigger question, "When is the DOJ and the FBI going to stop behaving like the PAPER LION, and start acting like the KING OF THE JUNGLE? Here is how we evolved to this point.

First companies started buying business by providing educational and research grants to teaching institutions in the late 80's. Some people see this as free market enterprise, unfortunately, many people in the industry view this as an inducement. Today, some companies subsidize fellowship programs, along with funding start-up practices for residents and fellows going into private practice. So, what are the odds that you can beat the house when you are selling?

Next, the industry decided to stretch the rules and opted to create consulting agreements. But let's face facts, unless a surgeon owns the IP, most products are developed in house, and are then taken to a surgeon-consultant for validation. In the beginning these consulting agreements were $2,500 per day plus expenses, today, they average $4,000 per day plus expenses. The outcome was companies like Blackstone Medical buying as much business as they could based on surgeon volume. Is this really an industry secret anymore? As the DOJ and FBI started to scrutinize this behavior, companies attempted to distance themselves only to come up with the next phase of buying physician business, the distributor. Legal eagles started educating the industry as how to beat the system.

As the industry evolved, more and more companies surfaced with surgeon investors some justifiably, some just looking for a windfall. Maybe its time that some of these smaller companies have their books audited by the DOJ. Without investing surgeon business, these companies would not stand a chance of surviving because the surgeons as well as the inventors keep holding on to the dream, that one day they will all hit the lottery.

So the next time you walk by Craig Patrick and Charles Bates, acknowledge them for their courage to stand up to a company that has exhibited that it is not possible to rehabilitate your habitual behavior, the inability to play by the rules. As I have stated before, until the DOJ and the FBI prosecute surgeons and distributors for their complicit behavior, the party goes on! The Spine Blogger wants to know what its readers think?